When Your Volume Is Too Small to Get the Contract You Want

You have a problem. A big problem. You’re a mid-sized business (aka anything smaller than a Fortune 500 company). As such, you need to make a variety of sourcing decisions. You have indirect spend and direct spend to manage, plus multiple categories to juggle. Behind the scenes, is a small to medium-sized procurement team handling it all.

Which means you’re stuck between a rock and a hard place. Why? Because you have enough procurement spend to need good contract discounts.  (Let’s be honest, buying from Costco just won’t cut it). But you may not have enough volume to get the agreements you want, at least not in every spend category. Sound familiar?

UNA’s own Cindy Rittel tackled this issue head-on,  in her recent article in the salient CPO Rising, entitled Help! My Organization is Too Small to Negotiate with Big Suppliers.

Below is a sneak peek and why you should read it.

Most procurement professionals will, at some point, struggle to get an agreement with the industry’s top suppliers. Why? The hard truth is, you’re not worth their time. 

Call it lack of volume, buying power, or leverage, it boils down to the same thing. The more prominent a supplier is, the pickier they get to be about who they partner with.

It doesn’t help that you probably also have people managing categories they’re not an expert in. Which means your inquiries will likely go ignored, and the power dynamic will be very much one-sided. As Cindy put it:

A large supplier won’t bother responding to an RFP if they consider the volume inadequate, nor will they engage in any sort of Supplier Relationship Management (SRM) if their time and resources are better spent chasing bigger fish. The problem lies with volume. Non-Fortune-500 companies simply won’t have a high enough volume of purchase to attract a large supplier’s attention, even if they consolidate purchasing orders across every department.

This lack of negotiation power is a debilitating problem if you need to cut costs, or if you don’t want to work with inferior suppliers. But what choice do you have? The good news is, increasing your buying power may be easier than you think.

Read the full article to find out how.

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